By Scott Wright

FRESH calls have been made by the hospitality sector for continued government support as its recovery from the pandemic comes under threat from the deepening cost-of-living crisis.

Tim Martin, founder and chairman of pub giant JD Wetherspoon, attacked the UK Government for pressing ahead with plans to return the rate of value-added tax applied to the industry to 20 per cent from April 1.

The rate of VAT applied to hospitality had been slashed to 5% in 2020 to support pubs, hotels and restaurants that had seen trade wiped out because of lockdown in the early months of the pandemic. It stayed at 5% until it was increased by the Treasury to 12.5% on September 30, and is now poised to be restored to 20%.

Hospitality campaigners have persistently argued that VAT should remain at 12.5% to help the industry be competitive amid rising costs, including soaring fuel bills and steep wage inflation prompted by an acute shortage of staff since Brexit.

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Mr Martin, whose company has 70 pubs in Scotland, criticised the imminent VAT rise move yesterday, declaring that the policy was damaging to town and city centre vitality. He argues it is unfair for food to attract a VAT rate of 20% when it is sold in pubs, restaurants and cafes when food sold in supermarkets is free from the tax.

Mr Martin said: “Pubs, restaurants and cafes form integral parts of high streets, whereas supermarkets are often in edge-of-town or out-of-town locations. Favouring supermarkets over pubs is bad for high streets and town centres. It is also an accepted principle of taxation that it should be fair and equitable, treating businesses that sell similar products in a similar way. Tax discrimination creates economic distortions. Supermarkets have clearly used their favourable tax treatment to subsidise the price of beer, wine and spirits over recent decades.

“Pubs, restaurants and cafes play an important role in the social fabric of the nation, as well as generating employment and vast amounts of taxes for the Treasury. The hospitality industry understands that governments need tax – but there should be a sensible rebalancing, so that all businesses selling similar products are treated in the same way.”

Responding to the comments, the Scottish Licensed Trade Association said the UK Government should look to other countries in Europe such as France, where VAT is lower for hospitality under a strategy to boost investment and employment in hotels and restaurants, while promoting the wide tourism industry.

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Paul Waterson, spokesman for the SLTA, said: “I think everybody is in agreement that hospitality has been devastated through this, and we need all the help we can get to try and stabilise the businesses, many of which haven’t opened at all [since lockdown] and many of which are [only] part of the week. We need all the help we can get to get back on an even keel. With all the staffing problems we have got, prices going up and so on, the government must really look on us as a special case.”

Mr Waterson added that hospitality figures such as Mr Martin “should be pushing for a differential” between the level of duty applied to alcohol sales in pubs compared with the duty charged in supermarkets. The SLTA argues that cutting duty in pubs, effectively by giving licensees the right to apply for a rebate, while raising it in the off-trade would boost the recovery of the hospitality sector from the pandemic, citing research from the Social Market Foundation that such a move would be “revenue neutral” to the Treasury.

Mr Waterson said: “We would like to keep the VAT rate at what it is or keep it down, and also have the Government look at this duty differential and the Social Market Foundation’s thoughts on that. It is definitely a debate worth having. In every way, Covid has accelerated these type of ideas.

“We really are in a bad position. It is certainly not back to normal, or anywhere near it.”